Academic: The independence of central banks supports monetary policy

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Academic: The independence of central banks supports monetary policy

Post  Admin on Thu Sep 07, 2017 6:05 pm

07/9/2017 12:00 am

Baghdad / Emad Al-Amara
Central banks, through the independence of their work, play a large role in the economic activity of their functions in the responsibility of issuing currency and control and supervision of the banking system, as a government banker, contributing to the impact of macroeconomic variables.
According to a specialist, the independence of these banks support the implementation of monetary policy and the tools it possesses and the methods and mechanisms used and the purposes sought in order to promote the general economic reality of their countries.
"The central banks, according to the economic system through which they are active, aim to achieve price stability and acceptable rates of economic growth, stressing that these banks are working to achieve a balance between cash flows and real .
The independence of the central bank means that the central bank alone is authorized to work to protect the value of cash and stabilize prices, and to be independent of the state in the management of monetary policy.
He pointed out that this independence does not mean the complete separation between the central bank and the government. Rather, the central bank must act as a government institution that exercises its functions according to the general framework of the state. He added that this institution has its specificity in making independent decisions regarding monetary policy, which must be consistent with the general economic policy of the state.

Economic systems
Thueny pointed out that these interpretations of the independence of central banks are reflections of the reality of political and economic systems, which vary between the liberalization of monetary and banking institutions and the intervention and restriction, which led to the formation of ideas to justify the independence of central banks, at the same time other opinions that the need to reduce This independence.
He pointed out that the justifications of independence call for the need for the Central Bank alone to be responsible for maintaining the stability of prices and set the basic objectives of monetary policy independently and away from the forms of intervention.
"The majority of countries whose economies have experienced very high prices and lack of control over this rise (free inflation), and assert that their ability to control and address this type of inflation later is through the enjoyment of central banks With a high degree of independence.

Monetary institution
Since the central bank is the main monetary institution in any country and its work includes monitoring and coordinating other institutions, the Central Bank must be independent
"He concluded by saying that the independence of the Central Bank would lead to the removal of the governmental influence from the procedures of these banks in terms of determining their expenditures and revenues, and thus separating the Central Bank from the general budget of the state.


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